Commerce rule scuttles another UDTP claim

Business plaintiffs in North Carolina are having some trouble with trebles.

When bringing claims in court against another business, many plaintiffs make great effort to shoehorn in a claim for unfair and deceptive trade practices. Their motivation is pretty easy to understand—a UDTP finding allows a judge to triple the amount of damages awarded. But a decision by a federal judge Feb. 6 was the second in a month to dismiss a UDTP claim for failing to meet the law’s requirement that the allegedly unfair acts be “in or affecting commerce.”

Wilmington-based Polyquest, Inc. alleges that it was approached by Vestar Corp about starting a joint venture to operate a recycling facility in New York. Polyquest agreed and lent the joint venture $750,000 to purchase the facility, but now claims that Vestar failed to hold up its end of running the day-to-day management of the venture. The company also alleges that a Vestar officer changed the passwords on the venture’s bank account to deny Polyquest access and improperly transferred $170,000 out of the account.

Polyquest sued Vestar, alleging tortious interference with contract and UDTP. In his ruling, U.S. District Court Judge James Fox allowed the interference with contract claim to proceed, but granted Vestar’s motion to dismiss the UDTP claim because the conduct at issue did not occur “in commerce.” Fox said that even though Vestar’s actions weren’t confined to the internal operations of a single business, its actions were still confined to the internal operation of a single market participant—its joint venture with Polyquest.

“The fact that separate entities comprise the single market participant does not alter this analysis; the case remains a dispute about the internal operations of the joint venture,” Fox wrote.

The decision follows a ruling by the North Carolina Business Court Jan. 28 that a company’s shareholders could not bring a UDTP claim against its directors over the way the company was sold to a French buyer. The court ruled that claim also fell afoul of the “in or affecting commerce” rule because it affected relationships only within a single business.

Michael Thomas, Michael Barnett and Susan Matthews of Patrick, Harper & Dixon in Hickory represented Vestar. Andrew Kent McVey and Michael Murchison of Murchison, Taylor & Gibson in Wilmington represented Polyquest.

The 23-page opinion is Polyquest, Inc. v. Vestar Corp, LLC (Lawyers Weekly No. 14-02-0143). A full opinion digest is available online at nclawyersweekly.com.

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